Industry trends food August 2025

Global overview: Production growth and decreasing food prices, but downside risks remain

We expect global food production to increase by 2.4% in 2025 and by 3.1% in 2026. Annual global food sales are in the same range. Among regions, Asia Pacific is expected to record above-average growth rates of more than 3% this year and 5% in 2026, while North America’s food production is forecast to grow only modestly in 2025 and 2026 (0.4% and 0.3% respectively).

Compared to other industries, the direct impact of tariffs on the food and beverages sector is modest, given a relatively low trade exposure and the perishable nature of output, which makes large cross-border trade costly and less economically viable. The food and drink industry benefits from regional self-sufficiency, although some specific product categories could face vulnerabilities. 

However, there is an indirect impact from tariffs in the form of lower economic growth and higher inflation, affecting disposable household incomes. For the food sector this could mean that consumers buy goods at lower price points, reduce spending on non-essential food and drink products and maintain rather than increase their consumption level. 

The slide in food commodity prices, that was set in motion after the shock of the February 2022 Russian invasion in Ukraine faded, has continued. Food prices decreased further quarter-on-quarter in Q1 of 2025, supported by better growing conditions in South America. Due to ample supply conditions global food prices are forecast to decrease in 2025 and then stabilise in 2026. 

United States: Price competition weighs on the margins of food businesses 

We expect US food and beverages output to increase by 0.8% in 2025 and to level off next year. Despite some easing, food price inflation will continue to put pressure on household budgets, which affects purchasing patterns. Actual price levels remain high, especially in some essential food categories. 

In the grocery retail sector, US households still face food prices that are almost 30% higher than pre-Covid. Consumers are seeking affordable options, and competition in the food sector is increasingly focused on price, which is creating margin pressure for food and beverages producers as well as retailers. Increasing merger and acquisition activity will put additional pressure on the margins of smaller food businesses.

Tariffs imposed on Canada and Mexico are an issue. Almost 44% of US food imports come from these two markets, with fruit prices particularly exposed.
If retailers look for cheaper products domestically, the excess demand will cause producers to raise their prices. 

Brazil: More pressure on retailers’ margins

We expect Brazilian food output to grow by 2.1% in 2025, followed by a 2.7% increase in 2026. The food and beverage market shows resilience despite economic headwinds. 

Discount promotions by large food retailers have resulted in lower margins for food producers. However, the mid- and long-term market prospects are good, due to rising disposable incomes and a large, young population. 

Mexico: Long-term outlook for the sector remains positive

Food and drink production in Mexico is expected to slow down slightly 2025, followed by a rebound next year. The impact of US tariffs remains a downside risk in the coming months, as they could increase prices for consumers and disrupt supply chains. 

With a growing population and a large middle-class compared to other countries in Latin America, food and drink spending will grow further in the medium-term. There are opportunities for premiumisation as consumer increasingly opt for higher quality food products.

China: A robust performance in 2025 and 2026

We expect Chinese food and beverages output to grow by 4.8% in 2025 and by 6.4% next year. Household spending is likely to gain momentum in the second half of 2025 due to reinvigorated policy efforts to stabilise jobs, increase wages, and support spending.
 
China’s growing middle class in first and second tier cities is more willing to spend than to save on food compared to previous generations. It is also less price-sensitive and seeks higher quality food products. However, in third-tier cities and below (and especially among low-income groups) consumers still prefer to pursue cost-effectiveness.

Food safety and quality issues remain a top priority for the industry. The market is also highly competitive with numerous local and international players vying for market share. This can lead to price wars and slim profit margins. 
Downside risks facing the industry include labour shortages in the food processing and services segments and price fluctuations for raw materials and international logistics.

India: An early monsoon supports sector growth

In 2025 food sector growth will be supported by the early onset of the annual monsoon, bolstering agricultural output and increasing rural household incomes (about 60% of workers are engaged in the agricultural sector). 

Good harvests limit price pressure on food items (those account for about half of the consumption basket). Sector growth will also be driven by population growth and rising household incomes and living standards. 

Rapid urbanisation is driving demand for convenient and packaged foods as urban consumers seek quick and easy meal solutions.  

Indonesia: A mixed picture of growth and challenges

In Indonesia, the food and beverages industry provides a significant contribution to economic growth and job creation. We expect production and sales to grow by about 2.5% annually in 2025 and 2026. The increase is driven by population growth and a rising middle class with higher purchasing power.  

Despite the expansion, the food sector is facing some challenges such as fierce competition in the retail segment, rising production costs, complex government regulations, and infrastructure or logistics issues. 

European Union and UK: Profit margins of food processers and producers remain thin

After a 2.8% increase in 2024, food and beverages production in the EU is forecast to grow by 2.1 % in 2025 and 1.4% in 2026. Foods sales are expected to increase by 1.5% this year. Private consumption is still underpinned by modest gains in employment and wage growth.

After a 2.6% increase in 2024, food sales in the UK will stagnate in 2025 and contract by 1.6% next year. Consumer confidence is weak and wage growth has slowed in the UK. 

In many European markets the profit margins of food producing and processing businesses are structurally thin and under pressure. This is due to a fiercely competitive environment, in which the bargaining power of major retailers and discounters is very strong. 

Despite decreasing over the past two years, prices for food items are still above 2019 levels across Europe. Consumers remain price-sensitive, which means that across Europe large discounters and private label products will remain very popular. Price wars will continue as food retailers compete for price conscious customers. 

Premium, organic and artisanal products have become increasingly popular in Western Europe, due to a shift towards health-conscious and sustainable food options. However, for smaller producers and retailers in this segment another surge in food price inflation and lower household purchasing power are downside risks. 

Curious to find out more?

Download the full report in the related documents section below for a detailed analysis of the challenges, performance, and credit risks facing the food and beverages industry’s major markets throughout the world.

To explore more on how these insights can strengthen your own credit risk strategy, speak with us at Atradius to see how we can help you stay ahead.